Damstahl Bi-Monthly Stainless Steel Briefing March 2013 Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 1 -
Damstahl Bi-Monthly Stainless Steel Briefing Issue 33, March 2013 Contents Stainless Steel at a Glance European Industry News & Business Climate (PMI) Market Performance: Relevant Issues in Germany Netherlands Denmark Sweden Norway Slovenia Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 2 -
Stainless Steel at a Glance Only Slow Market Improvement in Europe Demand: Stainless steel market in Europe remained comparatively subdued at the beginning of 2013. Particularly, the demand from end-users showed little signs of life. Stimulus can only come from abroad as the economic situation in Southern and Western Europe is still disastrous. A beginning recovery in Asia (mainly China) and continuous strength in North America is the main hope for European fabricators. The first quarter is usually a time of re-stocking. The recent drop of Ni prices was a stark recall that volatility still prevails spooking stockists. Mills: Financial results in Q4/12 were very disappointing. Weakening base prices combined with falling volumes resulted in heavy losses for virtually all European mills (long- and flat products). As a result, Aperam has announced a base price increase of 50 EUR/t in January, but it still remains to be seen whether the market accepts this. The Ni price correction in February lead to a slightly higher alloy surcharge in March. The European production system will be subject to major changes as Outokumpu is winding down its meltshop in Krefeld, Germany and increasing the output in Tornio, Finland. Aperam came forward as a contender to acquire AST in Terni, Italy. The Italian press reported, that two major Italian customers of AST Marcegaglia and Arvedi might be potential partners in the deal. This consolidation would definitely be a step in the right direction in Europe, but it remains to be seen whether it will get the nod from Brussels. Forecast 2013: SMR expects a drop in demand of -1% for this year (across all products), before the European market will recover in 2014. There are indications that the market situation in the six Damstahl Countries will be better than in the rest of Europe as it consists of mostly export oriented economies including Germany, Sweden, Denmark, the Netherlands and Slovenia. Markets with a negative growth this year include Italy, Spain, Portugal, Greece and perhaps also France. Consumer goods (incl. automotive) will remain subdued throughout the year, whilst the demand from the building and construction sector will be growing. The very important process equipment sector starts the year weak, but is expected to recover substantially after the summer, as the number of projects in the chemical and petrochemical industry that will be commissioned in 2014 is higher than 2013 (increasing the stainless steel demand at least 6 months prior to commissioning). China and Taiwan: Chinese sheet and strip mills stepped up exports efforts after a (temporary) phase of market absence. Nevertheless, Europe seems not to be the top-priority for them at the moment. On the other hand, Taiwanese mills and service centres are price aggressive in Europe at the moment. Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 3 -
European Industry News Weak 2012 Results Situation for Mills will remain challenging this Year The European stainless steel crude steel production increased from 1.6 mill. t in Q3/12 to 1.7 mill. t in Q4/12. Compared to Q4/11, production was 6% lower. For the full year 2012, production dropped by around 2% to 7.4 mill. t (2011: 7.6 mill. t). The two Damstahl Countries, Germany and Sweden belonged to the biggest losers in Europe with double-digit reductions. It is expected that the stainless steel crude steel production will continue to fall in Germany due to the planned closure of melting in Krefeld until the end of 2013. For the full year 2012, the stainless steel crude steel production in the Damstahl Countries reached 1.9 mill. t (2011: 2.2 mill. t). Aperam: Steel shipments (including some electrical steels) were 407,000 t in Q4/12 (Q3/12: 410,000 t). In full year 2012, shipments amounted 1,683 mill. t (minus 4% yoy). Compared with Q3/12, sales increased by 7% in Q4/12 (to 1,294 mill. USD after 1,207 mill. USD). In full year 2012, sales were 5,261 mill. USD, a 17% decrease compared to 6,345 mill. USD in 2011. Aperam reported an operating loss of 45 mill. USD in Q4/12 (Q3/12: loss of 29 mill. USD). In full year 2012, the operating loss amounted 106 mill. USD after an operating profit of 45 mill. USD in 2011. Aperam shows an EBITDA of 214 mill. USD in 2012, a 40% decrease compared to 2011 (356 mill. USD). The company expects that EBITDA in Q1/13 will improve compared to Q4/12 due to higher market activity. Outokumpu Stainless: The results for Outokumpu (excluding Inoxum) were unsatisfactory in 2012. Results before taxes fell to minus 523 mill. EUR (after minus 244 mill. EUR in 2011). Sales were 10% down from 5,009 mill. EUR in 2011 to 4,538 mill. EUR in 2012. Particularly the weak market environment in HY2/12 contributed to this result. The Q4/12 operating result fell to minus 200 mill. EUR (after minus 89 mill. EUR in Q3/12). However, the total stainless steel deliveries for the full year 2012 increased by 2.7% to 1,428,000 t (2011: 1,391,000 t). For Q1/13, stainless steel deliveries are expected to be in the range from 680,000 to 750,000 tonnes. Outokumpu does not expect a substantial market price improvement before March 2013. The management emphasized that it s necessary to implement the targeted 200 mill. EUR of synergy effects after the merger with Inoxum. Outokumpu is out for further opportunities to make savings in 2013 the focus will be on cash flow generation and reduction of capital expenditures. In addition, Outokumpu intends to implement a tight working capital management. Outokumpu/Inoxum: Outokumpu is currently in the process of divesting AST in Italy as required by the European Commission. Besides Aperam, there is an (unconfirmed) number of 5 other interested investors, including financial investors as well as industrial investors (of which one is an Asian company). The asking price is 560 mill. EUR, but it is somewhat unlikely that Outokumpu will achieve this. A decision shall be made until mid-may. Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 4 -
Index of 50 = Break Even Point Where do we stand in the Business Cycle? PMI Status January 2013 USA and China > 50 / Europe improved - but still in negative territory 65 EU USA China 60 55 50 45 40 35 30 Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 5 -
[ metric tonnes] China Monthly Exports December 2012 Flat and Long Product Exports have increased again at Year-End 2012 Flat remained however behind its Peak Levels China monthly Exports* 200,000 180,000 160,000 Flat Products Long Products 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - *excl. internal trade Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 6 -
Relevant Issues in Damstahl-Land Germany, Netherlands Germany: The current stainless steel demand in the German market is considered as acceptable. Order intake at distributors can be compared to Q1/12 and is better than in Q4/12. The current volatility of the Ni price has a negative impact on stockholders they will not continue with re-stocking, but switch into a wait and see mode, as stock levels are considered sufficient. Price competition in the European market is strong at the moment. Stocks: German stainless steel stock levels for cold rolled flat slightly fell from January 2012 to January 2013 but the stock-reach increased from 50 to 60 days as monthly sales volumes fell from over 11,000 tpm (sheet and strip) at the beginning of 2012 to less than 10,000 tpm in Q4/12. In case of bars, the development was quite dramatic. Stock levels increased by 10% over 2012 and sales volumes fell from over 8,000 tpm at the beginning of the year to less than 6,000 tpm in Q4/12. As a result, the stock-reach increased from 100 days to over 150 days in 2012. Damstahl: The company decided to invest around 4.5 mill. EUR in a fully automatic high rack warehouse for fittings and flanges in Langenfeld. Start-up of the new facility is planned for Q4/13. ZEW s (Centre for European Economic Research) indicator of economic sentiment for Germany increased by 24.6 points in January 2013 and further 16.7 points in February 2013, standing now at a level of 48.2 points. This is the third increase in a row and the highest level since May 2010, showing that this macro-economic think tank expects the economic situation to improve during the next months. GEA Group: The order intake of this major stainless steel consumer increased by 5.2% in 2012 to 5,901 mill. EUR (1,478 mill. EUR in Q4/12). Revenues for the full year 2012 grew by 5.6% to 5,720 mill. EUR and the operating EBIT increased by 7.1% to 562 mill. EUR, resulting in an operating EBIT margin of 9.8%. WMF: The cutlery and catering equipment producer has exceeded for the first time the one bn EUR turnover level in 2012 (1.03 bn EUR / +5% yoy). International sales increased by 6%. Sales to households (pots, pans, cutlery) and coffee machines grew over average, while sales to hotels and small household appliances declined in 2012. Netherlands: There is no growth seen in the Dutch stainless market by leading distributors, but an increase in inquiries indicates that more activity can be expected. However, there are considerable differences between industry segments. The construction industry is weak and will not improve in 2013. The oil and gas industry as well as the important petrochemical sector show signs of growth. Royal DSM, a life sciences and materials sciences firm based in the Netherlands and major user of stainless steel for chemical process equipment in the Netherlands has entered into an agreement to acquire Fortitech, a US-based provider of food ingredient blends, for 634 mill. USD in cash. According to Statistics Netherlands, the average output of the Dutch manufacturing industry was more than 1% up in December 2012 (yoy). The strongest increase occurred in the sectors petroleum, chemical, rubber and plastic products (+5%), while the output in the sector electronics and machinery, declined by nearly 8%. Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 7 -
Relevant Issues in Damstahl-Land Denmark, Sweden, Norway Denmark: The stainless steel market is suffering at the moment. Orders received by stockists are smaller than usual. This lacklustre market activity leads to a strong combat among stockholders. Grundfos: The Danish pump manufacturer announced that they will acquire the long term local Australian partner, B.K.B. Pumps & Tanks Pty Ltd. The deal closure is expected to be finalized by early April 2013. Arla Foods Ingredients: A subsidiary of Arla Foods, has completed the expansion of its whey processing facility (production of special proteins and nutritional ingredients) in Viby, Denmark. The expanded facility was inaugurated in February 2013. The expansion will almost double Arla Foods Ingredients whey processing capacity in Denmark. The expansion required an investment of more than 57 mill. EUR. Growth Plan DK : Battling a stagnant economy, Denmark s government is planning to slash corporate taxes in phases over the next three years. The 1 st step is to reduce the corporate tax rate from 25% to 22% making it one of the lowest in the region. Overall the initiatives shall create 150,000 new jobs. Sweden: The stainless steel market in Sweden is still quite slow and uncertainty about how 2013 will develop prevails. But there are small promising signs compared to end of 2012. Alfa Laval: Order intake increased by 7% to 7,252 mill. SEK in Q4/12. In full year 2012, order intake increased by 5.8% to 30,339 mill. SEK. Net sales in Q4/12 increased 15% compared to Q3/12. In full year 2012, net sales increased by 4% and the EBITA margin reached 16.5%, demonstrating the health of this company. BE-Group: Net sales decreased by 22% (yoy) in full year 2012 amounting to 998 mill. SEK (2011: 1,288 mill. SEK). Shipped tonnage dropped by 14% in the same period. The operating result weakened to minus 42 mill. SEK, compared to positive operating result of +1 mill. SEK in 2011. For the full year 2012, new industry orders decreased by 6.0% compared to 2011, but December was 7.7% higher than November. The petroleum industry developed the weakest (-6.3%) while the industry for fabricated metal products developed the strongest (+19.7%). 2012 was weak: Although the industrial production grew by 1.3% in December 2012 compared to the preceding month, Q4/12 was down by 2.9% compared to Q3/12 and the full year 2012 recorded a decline of -4.2% (yoy). Norway: The growth in total manufacturing output shows signs of levelling-out. A weaker demand from export markets explains this result. The short-term outlook for Q1/13 is considered to be better with prospects of a further growth in fabrication. The output in manufacturing sector declined by 0.9% in Q4/12 compared to Q3/12. In full year 2012, the production in manufacturing increased by 2.7% (yoy). Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 8 -
Relevant Issues in Damstahl-Land Norway, Slovenia The Norwegian construction industry stagnated (+0.3%) in Q4/12 compared to Q3/12 but is up by 3% (yoy). The civil engineering segment declined by 1.5% in Q4/12 compared to Q3/12 but increased by 7.9% (yoy). The building sector production increased by 1.5% in Q4/12 compared to Q3/12 and 1.5% (yoy). Aker Solutions: Aker Solutions revenues amounted 12.0 bn NOK in Q4/12 (qoq: +7% / yoy: +3%). For the entire year 2012, Aker Solutions has reached a turnover of 44.9 bn NOK, after 36.5 bn NOK in 2011 (+23%). EBITDA increased by 38% to 4.7 bn NOK from to 3.4 bn NOK in 2011. The order intake increased by 47% to 60.3 bn NOK compared to 41.3 bn NOK in 2011. Aker s activity is strong in Norway itself (new discoveries give increased confidence), Africa and North America (increasing number of deep water projects for Aker and further improvement of off-shore activity). The company had an improving order intake in its segments drilling technology and subsea equipment. Statoil: Oil/gas production grew by 8% in 2012 (yoy). In full year 2012, the net operating income was 206.6 bn NOK compared to 211.8 bn NOK in 2011 (-2%). The net income dropped by 11% from 78.4 bn NOK in 2011 to 69.5 bn NOK in 2012. In Q4/12, the net operating income increased by 12% to 45.8 bn NOK compared to 40.9 bn NOK in Q3/12 (yoy: -25%). Statoil maintains its ambition of producing more than 2.5 mill. barrels of oil equivalents per day by 2020 and estimates organic capital expenditures for 2013 at around 19 bn USD. Slovenia: The stainless steel market in Slovenia started fairly well into 2013. However, the demand slowed somewhat down at the end of January and the first weeks of February. The market is relatively stable. It is expected, that February will remain still quiet but there will be a demand growth in March. Gorenje: The Slovenian appliance manufacturer launched mass production at the new appliance plant in Valjevo, Serbia. This new plant is Gorenje's second refrigerator/freezer facility in Valjevo the first one was opened in 2006. The combined output of both facilities for 2013 is planned at around 800,000 units. Investment into the new plant amounted 21 mill. EUR. Acroni: Acroni rolled the first plate on the new plate rolling mill. installed in January 2013. The new plate rolling mill. will increase the width of plates from 2,000 to 2,500 mm and depending on the stainless steel grade reduce plate thickness down to 7 mm. In comparison with November 2012, the value of construction put in place in December 2012 increased by 7.2%. Regarding buildings, the value of construction decreased by 19.7%, while civil engineering increased by 22.3% on the other hand. Compared with December 2011, construction activity decreased by almost 14%. Damstahl 2013, Damstahl - a member of the NEUMO-Ehrenberg-Group - 9 -
Report: Stainless Steel in Damstahl-Land, No. 11, March 2012 Damstahl 2012, Damstahl - a member of the NEUMO-Ehrenberg-Group - 10 -